Reducing mail volume worldwide by up to 40% and all but eliminating sweeps offers from its marketing mix helped Reader’s Digest Association Inc. regain its financial foothold after sales continued to fall during the late 1990’s.
Company executives looked on as sales dropped from 3.2 billion in 1996 to 2.5 billion in 1999 and “every product in every market declined around the world,” Thomas O. Ryder, the association’s CEO since 1998, said yesterday as the keynote speaker at the opening session of Direct Marketing Days in New York.
He said that things got so bad at one point that a colleague told him that company executives ” formed firing squads in circles.”
Ryder, who is credited with executing a strategic plan that is underway and enabling the company to begin to regain its foothold, said problems leading to the decline were numerous. The problems included overmailing, which in turn exhausted the customer list, and the addition of products within the same lines, such as gardening, that marginalized key products in those areas. In addition, the company used only one marketing channel, sweeps-sold direct mail. ” I don’t need to tell anybody in this room about the problems with sweepstakes,” he said.
To reverse the very public downward trend, the company put in place a strategy to rebuild. It shunned sweeps offers and scaled back mail volume. It began targeting a variety of products to segmented sections of the house file and concentrated on core markets such as home, health, family and faith. It branched out into new marketing channels and set stiff goals to make the company smaller and more profitable –including reducing the cost base by $350 million and revenue by $200 million by June 2001–before initiating a growth phase.
Plans also include developing new products and services in core categories, venturing into new countries like China and Indonesia. And the long-term plan includes doubling revenue to $5 billion and improving profitability by five to six times.
Some of the new business ventures include a focus on health products and services such as selling different types of insurance and a partnership to offer customers a discounted prescription plan.
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